Commentary

VW Unveils Radical New Strategy And 'Mindset' For Next Decade

Volkswagen CEO Matthias Müller unveiled several radical new strategies for the next 10 years and talked about establishing an “innovative culture” within the sprawling automaker in a live-streamed speech and press conference this morning from company headquarters in Germany.

Among other things, Müller confirmed the reporting in several walk-up articles that the company would aggressively develop electric vehicles — it projects more than 30 new e-vehicles by 2025 — and a “competitive self-driving system,” as well as consolidate its in-house components manufacturing process in order to slash costs.

“Calling it a transformative strategy, [Müller] said … that battery-powered vehicles could account for as much as 25% of total sales within a decade. Operating profit would rise to as much as 8% of sales by 2025, he said, a modest increase from 6% in 2015,” Jack Ewing reports for the New York Times.

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“The new plan also appeared to be an attempt to change the conversation from diesel emissions. Volkswagen is in intense talks with lawyers for its United States customers about how much it must compensate them for manipulating emissions tests to make its diesels seem cleaner than they were,” Ewing reminds us.

“Our future program ‘Together — Strategy 2025’ is geared to sustained profitable growth,” according to the company’s translation of the speech prepared for Müller’s delivery. “It has four building blocks:

  • Firstly, we are transforming our core business. Developing, building and selling vehicles will remain essential for Volkswagen going forward. But the face of this business will change so radically and so irreversibly that a word like ‘evolution’ just does not cover what we lies ahead of us.

  • Secondly, we are building a new mobility solutions business — as a cross-brand, autonomous unit. We are doing this to make sure that we can develop this additional new growth driver with the necessary agility and entrepreneurial focus.

  • Thirdly, we are strengthening Volkswagen’s innovation power and placing it on an even broader footing than before. To attain this, we are mobilizing in-house resources and harnessing outside impetus.

  • Fourthly, we are securing the finance for the massive investments that lie ahead. We will adjust all available levers to achieve this.”

“In spite of the carmaker’s diesel scandal, a spirit of optimism is spreading through the ranks of Volkswagen, at least in the immediate vicinity of [Müller],” Martin Murphy, Christian Schnell and Stefan Menzel report for the global edition of the German financial publication Handelsblatt.

“And his goals are ambitious. In the future, the Wolfsburg-based company wants to be more than an automaker, but also a leading ‘mobility provider.’ The declared rival is no longer only its traditional competitor Toyota or General Motors, but also ride-hailing services like Uber or data octopuses such as Google, which is entering the mobility business,” they write.

The company plans to make Israeli ride-hailing app GETT, which it recently invested in, the nucleus of a new mobility-services unit, William Boston reported for the Wall Street Journal before this morning’s event kicked off at 6 a.m. EDT. “The unit is expected to be based in Berlin, at arm’s length from headquarters in Wolfsburg and close to the city’s thriving tech scene.”

It “is a small financial step but a leap for Volkswagen, which until the diesel crisis tended to only pay lip service to electric vehicles and technology that is reshaping the auto industry,” Boston writes.

Volkswagen is also planning to cut costs by consolidating the way it develops and manufactures parts for its vehicles, two sources told the Financial Times’ Patrick McGee prior to the announcements this morning. 

“In stark contrast to many of its rivals, including Toyota, VW makes many of its components,” McGee writes. “Under the shake-up, the German carmaker is planning to draw together the various component operations that are scattered across the 12-brand group, and combine them in a single unit. Much of the component operations are centered on the underperforming VW brand.”

In the speech, Müller confirmed the consolidation, pointing out that the company’s components business has 67,000 employees at 26 locations across five continents.

“The realignment will give the components business greater entrepreneurial freedom,” he said. “We anticipate that this will improve transparency while boosting internal competition. It will also contribute substantially to future topics such as electro-mobility.”

Müller also distanced the company from the dishonor of its recent emission scandal in his prepared remarks.

“We do not just pay lip service to integrity, responsibility and sustainability; they are fundamental to our future. Our most important currency is credibility and trust in our brands, our products and Volkswagen as a whole,” he said.

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